Abstract

This article introduces an investor-oriented framework for the evaluation of renewable energy policy, applies these newly developed criteria to a qualitative comparison of the primary policy instruments, and offers recommendations to enhance the investor appeal of renewable energy in the United States.

The multi-trillion dollar task of scaling renewable energy technologies to mitigate climate change, ensure energy security, and create green jobs is one of the most daunting challenges of the twenty-first century. It is, in fact, too great a challenge for either the public or private sector to shoulder alone. Rather, public policy must catalyze private investment in renewable energy. Empirical evidence of deployment support for renewables from thirty-five countries reveals enormous differences in policy performance. Remarkably, some policies leverage four times as much investment in renewable energy as others, despite offering only half as much compensation to renewable power project developers. These results point to forces at play other than policy remuneration and generation costs alone.

To better understand these forces, this article develops a framework of criteria to guide the evaluation of deployment policies beyond remuneration. Unlike previous studies, the article assumes an investor perspective to explore how investment-based, market-based, and behavioral “soft-cost” factors determine a policy’s ability to spur investment in renewable energy. Application of these “soft-cost” factors to analyze the primary policy instruments across the globe sheds light on their conceptual capacity to promote the deployment of renewable energy technologies. The results offer an explanation for the observed weak correlation between policy performance and remuneration. Indeed, the most successful and cost-effective deployment policies are those with the most favorable impact on the examined “soft-cost” factors and, hence, with the greatest conceptual appeal to renewable energy investors.

Drawing on these insights, the article develops recommendations for the design and implementation of policies that offer greater appeal to renewable energy investors and allow for faster deployment of renewables – at lower cost to American ratepayers and taxpayers.